Tonight I’m at Nabarro in London, launching the Future of Energy report. It’s a great example of how the Intersections process can give you rapid insight into the future of a market.

Here are the five conclusions we’ve reached about the future shape of the UK energy market:

The future is electric

Energy is local, not national

Access, not supply

Disruptive business models explode

Economy and ecology align

The future is electric

Sometimes you reach a conclusion that sounds blindingly obvious, and you have to check with people that it is even worth saying. I checked, and apparently, this remains a conclusion that will surprise many: tomorrow’s world is powered by limitless, cheap, clean, energy.

If that sounds like the wishful thinking of some dope-addled, eco-hippy, it’s quite the opposite. Green energy — particularly solar — wins not because it is in some way the ‘right’ option, but because it is by some margin both the cheapest and most secure form of energy.

The cost per kilowatt hour of solar energy is falling dramatically based solely on the incredible volumes of solar cells being produced and deployed. Factor in advances in the cells’ efficiency, new manufacturing techniques, and new formats (not just big square panels), and it’s easy to see that fall accelerating rather than slowing.

At the same time, gas supplies are starting to look at serious risk from declining production and growing political instability. Factor in the rapid advances coming in battery technology — overcoming the inherently intermittent nature of solar — and it’s clear: the future is electric.

Local, not national

The problems of securing new national generating capacity to replace Britain’s ageing coal and nuclear stations are well-documented. Building large new plants requires huge investments. If those investments are going to come from private sources then they want a guarantee on their returns, going as we are into an increasingly uncertain environment. The result is that the tax payer ends up paying well over the odds for security of supply.

Centralised generation and a largely one-way system of distribution just doesn’t make sense any more, when generation and storage technology is increasingly commoditised and even consumerised. The future grid is not big plants pumping power over long distances to the cities where it is consumed. It’s a hugely diverse picture of small scale generation and storage in close proximity to where the energy is consumed.

This does not mean that every home and business will provide its own power. Neither the economics nor the demographics stack up for this. Setting up generation and storage behind the meter requires capital a lot of people and businesses lack. Renting is on the rise and many landlords won’t take the risk of entering into the energy business for a long time — despite the potential returns. Many homes and businesses alike will lack the space for the relevant equipment. There will be a behind-the-meter market but also a sizeable opportunity for more small-scale local generation and storage.

Access, not supply

Even years after the advent of more small-scale generation, the overwhelming picture of the national electricity network is of a one-way, supplier/consumer relationship. This concept will be destroyed by the fundamental shift to more distributed generation: no longer is the grid about getting energy to us, it’s about balancing supply and demand across micro and macro regions.

Instead of a network of networks, as the national grid is now, it will become a network of networks of networks of networks: diverse and complex with fast-changing and multi-directional flows of energy.

Disruptive business models explode

As the flow of energy changes, so too will the flow of information through the network. Intelligence about availability and demand will feed into much more dynamic shifts in pricing and create entirely new billing models.

New businesses will spring up to capitalise on the complex flows and increased availability of information. The comparison sites are only the beginning of what is to come as smart homes, meters, grids, factories and vehicles come online.

Economy and ecology align

Look at any chart of global temperatures and it’s pretty clear that we have so far singularly failed to address climate change. Given the political winds across the Atlantic, it seems unlikely we’ll see renewed impetus any time soon from the biggest polluters.

The continued existence of our species has failed to motivate us into change. But the opportunity to save a few quid might succeed. Clean, green energy is cheap. Bringing supply closer to the consumer makes more transparent the economics of efficiency: it’s an awful lot cheaper to consume the energy you generate than it is to buy it in. For the first time the middle-class masses may be compelled to consume within their means.

Even if they don’t, our consumption is contracting, not climbing. Appliances of all kinds are increasingly efficient — so much so that their increasingly prevalence can’t offset the gains. One desktop PC consumes as much energy as 40 tablet chargers.

On stage at the Superyacht Design Symposium this week, I proposed three ways in which technology is going to transform the superyacht in the coming years. You may have no interest in these playthings of the hyperwealthy. But the same trends are going to transform the more mundane world the rest of us inhabit.

Hidden Intelligence

The first transformation is the ubiquity of connected computing combined with highly powerful AIs. The history of computing is a history of shrinking devices with ever-improving user interfaces, taking us from alien mainframes that forced us to communicate on their terms, to sensor-laden devices that try to interpret our behaviours. The next obvious step is devices that vanish into the environment around us and interact by anticipating our needs and responding without any manual intervention.

In a yacht context this likely means smaller crews, as in every other field of work. But it also means much more responsive machines. Spaces that transform themselves, fully autonomous lighting, heating and entertainment — all increasingly normal as part of any smart home. But imagine a boat that automatically orients itself to the sunset based on where you’re sat.

Energy Revolution

My research into energy for a report I’m assembling with the law firm Nabarro, has made it abundantly clear that the future is solar and electric. Combining next generation solar cells with advanced battery technologies makes for incredible changes in the possibilities of yacht design.

Metal-air batteries will have energy densities comparable to fossil fuels. With high performance solar cells, much smaller reserves of energy will be required. And what there is will be much more flexible in terms of layout. No more fuel tanks — sometimes measuring hundreds of thousands of litres. Instead batteries can be incorporated into the structure and distributed throughout the hull. Motors too can me much more efficiently placed, will be lighter, quieter and simpler to maintain.

There are solar yachts right now but they are the G-Whizz’s of the water-born world. What’s coming is more like a Tesla.

New Materials

Perhaps the most exciting opportunity is in new materials. Like other industries focused on high performance, the yacht industry has been fast to adopt new carbon-based materials. But these are a mere first step towards the incredible possibilities presented by various forms of graphene, and other recently-discovered and nano-engineered materials.

Integrated functions like heating, or panel displays, will save huge amounts of space and weight. Exponential increases in strength to weight will enable the realisation of incredible designs, to date unfeasible.

Invisible luxury

Together these three technological transformations will change the perceived impact of technology on the design and operation of superyachts, as it will on the infrastructure of all our lives.

Technology today is intrusive: garish screens, noisy engines, over-sized structures. Tomorrow’s technology is not only finer, lighter, and quieter, it actively works to get out of our way. It doesn’t need manual control to work on our behalf.

The Daily Telegraph covered Britain’s energy shortage recently with the headline “Britain could face blackouts if the wind doesn’t blow”. Clear about where the responsibility lay for the small margin between our generating capacity and consumption, the article went on to state that “the margin has eroded in recent years as environmental regulations force the closure of old coal-fired power plants.”

In case you didn’t know, since I wrote this piece last year, the forecast margin between our peak consumption and demand for electricity has fallen to 1.2%. To cope, National Grid has taken a number of emergency measures to boost this to 5.1%, such as paying large consumers to reduce their usage at peak times. But as The Guardian pointed out last year, “The now dismantled state-owned Central Electricity Generating Board at one time used to argue that a minimum capacity to cope with peak demand should not be less than 25%. “

How did we get into this situation? Well you could point to environmental legislation: the EU Large Combustion Plants Directive has played a role in the recent closure of coal and oil-fired power plants. But few would argue with the reasoning behind it — to cut emissions of sulphur dioxide and nitrogen oxides. As the DEFRA website puts it: “These pollutants are major contributors to acid deposition, which acidifies soils and freshwater bodies, damages plants and aquatic habitats, and corrodes building materials. Nitrogen oxides react with volatile organic compounds in the presence of sunlight to form ozone that can adversely affect human health and ecosystems.”

Those evil Eurocrats. Who would want to stop that?

Of course it is not only coal and oil fired power stations that have shut, or are scheduled to shut. By my count (using this source and news stories), two nuclear stations have closed already and a further six are due to close in the next ten years.

Is this more green Eurocracy?

Nope. The LCPD doesn’t apply to nuclear power stations. So what do these stations that are closing or scheduled for closure have in common with the coal and oil plants that have shut?

Age.

The newest of these plants began delivering power to the grid in 1988, 27 years ago. The oldest? 1967.

When companies say that they have had to shut their plants because of environmental legislation, what they mean is that the technologies at the core of these stations is so old that it is uneconomic to control their very harmful pollution.

The reason we might not be able to keep the lights on is this: whether or not the wind blows, we simply haven’t built enough generating capacity in the last twenty years.

Now what happened twenty years ago that might mean we stopped building so much generating capacity? Privatisation.

This isn’t a tirade against privatisation — I try to stay away from the ‘big P’ politics in this blog. Rather it is a statement of fact: the state no longer has the powers it needs to keep the lights on for its citizens.

It’s not for lack of trying. Take the first new nuclear plant to be built in the UK, scheduled for completion some time in the mid 2020s at Hinkley Point in Somerset. The government has had to guarantee the operator of this plant a minimum price of £92.50 per megawatt hour, inflation linked, for 35 years. Similar prices have had to be provided to renewable energy companies to support their investment. Yet every year the margin of safety seems to fall.

It appears the private sector doesn’t want to take the risk on the long term returns a power station might provide. The government doesn’t seem to be able to offer sufficient guarantees to the private sector to make it attractive. And even when it does, it faces challenges over state aid rules.

Well we already import energy from Europe. And most scenarios produced by National Grid recently suggest this will continue.

But the big increases? It looks like it’s going to have to come from us folks: small scale generation. Combined heat and power. Community waste projects. Solar panels on your roof and batteries in your basement(Elon Musk will be delighted). And, of course, the continuing decline in demand.

This all presents a big challenge for the grid, which wasn’t designed for energy storage or distributed generation and will need major investment to transform. A level of investment the private sector will bear? That’s a post for another day.

There’s a moment when I’m giving talks when I choke slightly. I have a little trouble getting the words out.

It’s when I tell people that I believe technology will be a bigger change driver than anything, including climate change.

I believe this only for a specific geography (the UK and some other northern/western developed countries), and within a specific time frame (the next 20 years or so). But even though I believe it strongly, I still find it a challenging idea, given the devastation that climate change will likely cause elsewhere within that timeframe.

The idea rarely gets the reaction in the room that I’m feeling inside. Are people so comfortable dismissing the effects of climate change? I’m always hoping to be challenged on this but never have been.

To be fair to the audiences, they’re not alone in paying scant attention to the threats. In a recent study of the risks facing major corporations, climate change didn’t even rank in the top 19 concerns for chief executives.

This survey was conducted by PwC, where a different division gave this stark assessment: “At current rates of de-carbonisation we would be heading towards the worst projected scenario of the IPCC, leading to significant chance of exceeding 4 degrees of warming.”

This is accountants talking science. Their language is extraordinarily tempered and conservative. But what they are talking about is floods in some areas and wars over water shortages in others. Drastic falls in crop yields. Extreme weather events and raging wildfires.

Surprise surprise, our national generating capacity is a little shy of what it should be. This winter even with contingency plans activated, we will only be producing 6% more electricity than we consume. That’s not a great margin for error. Three years ago the figure was 17%.

To put this into context, a popular episode of Eastenders or Corrie can cause power consumption to spike by around 4.5% of the currently estimated peak capacity for winter (53.6 Gigawatts). I’m not suggesting for a second that the National Grid haven’t thought of this, or that blackouts are actually likely — most experts agree they are not.

But still: a single-digit margin for error on one of the most crucial resources to our physical well being, national security and economic activity is not exactly reassuring.

The National Grid has known for some years that this situation would arise, as is shown in this slide deck from 2009: http://www.exeter.ac.uk/few/2009/documents/presentations09/lewis_dale.pdf. What this also shows is the level of work required just to keep the lights on — literally. What it doesn’t show is that the very principles on which our national energy infrastructure is built are wrong.

180 or so large power stations and a giant grid to distribute the power they generate is an outdated model for this century. Domestic energy consumption has been falling slowly but steadily for the last few years, in part due to the economic downturn but also thanks to increasingly efficient homes and appliances. We can now generate an increasing proportion of our needs in a distributed fashion through solar and wind. What we need is a grid that supports our increasingly distributed generation and low energy needs.

There’s a lot of whining about renewable energy sources. Wind turbines are ugly. Solar panels aren’t as efficient as promoted. Blah blah blah. The debate sounds very much like the current one about the Human Rights Act. Who’d want to protect those, right? And who’d want a source of energy that renewed itself? That sounds like a terrible idea…

The economics of renewables are undeniable — particularly solar. All around the world solar energy generation is overtaking fossil fuels in cost effectiveness. Whatever your opinion on the matter, renewable energy sources are winning the fact war. Though it will be a long time until they are the whole story, to bet against them over that long term is plain daft.

Given that this is clear to anyone willing to look at the evidence, we should be making our bets as a nation there. Investing in a grid that supports distributed generation and particularly storage: the challenge of renewables is that you can’t spin them up when you want them like a generator, so we need means of storing energy — again in a distributed fashion. The answer could be batteries, it could be flywheels, it could be something we haven’t invented yet: a healthy dose of investment here would be very, very wise both for national security and international competitiveness.

With every home and enterprise in the country contributing its roof space to energy generation, and a sensible investment programme in the grid, we would have cheap, secure power for years to come. And no worries about whether one too many mid-Corrie cuppas would take the country offline.

Solar power is expensive. That has always been the accusation. By the time you have manufactured large, inefficient sheets of solar cells and mounted them on roofs or in dedicated installations, the cost per Kilowatt Hour (kWh) is much higher than for coal or nuclear counterparts.

Expect that it isn’t. And even if it is, it won’t be.

Comparing Costs

In the last few months there have been two interesting reports on solar power and some fascinating shifts in the underlying technology of the solar cell.

The first report in May last year came from an organisation called GlobalData. It highlighted that solar power is getting more economical all the time, as the efficiency of the technology and the scale of its deployment increases. Using a measure called the Levelised Cost of Electricity to compare sources on an even basis, taking into account the cost of generation, solar power will hit parity with market prices for electricity in 2017.

Solar power will be cheaper than nuclear or coal in just four years time. That’s not long when you are considering the construction of new power plants.

If you try to account for the environmental and health costs of energy generation, then solar power is already on a par with other forms of generation, and wind power is even cheaper. These costs are not insignificant: take for example, the cost of cleaning up old nuclear reactors, or the cost to the National Health Service from coal pollution.

With societal costs taken into account, wind power costs around 6p per kWh, solar between 10p and 18p. By contrast the societal costs alone of coal are 9p per kWh. New nuclear power plants are way more expensive at between 31p and 54p per kWh.

Increasing Efficiency

Solar power suffers because it does have an environmental cost. The materials from which solar cells are manufactured can be pretty unpleasant, as can the processes used to manipulate them. Certainly a lot of electricity is consumed in the making. And because the cells are relatively inefficient — around 14% of the light energy hitting the cell gets turned into electricity — it’s hard for them to overcome these costs.

Bright Future

There are operational issues with renewables to overcome: such as delivering energy when the wind doesn’t blow and the sun doesn’t shine. But these are far from insurmountable — certainly when the sums involved are considered. Battery technology is advancing apace and trailer-sized Lithium Ion units already being used to smooth power delivery to cities.

Overcoming these challenges is simply a matter of time and directing resources to the right ends. Increase in electricity usage has slowed dramatically in some western countries (including the US), thanks to greener living and technologies such as LED lighting that are an order of magnitude more efficient than their predecessors. We should be able to generate our remaining needs cleanly and cheaply from the sun.

I’ve seen a lot of references to the impact of increased biofuel production on the price of food recently. It seems to be accepted that they are one of the major causes of the incredible rises we have recently seen; rises that have almost doubled the price of bread in the supermarkets. But I question whether it really has been the growing of biofuels behind this increase.

For all the references to biofuels in articles about rising food prices, I have been able to find no data on how much farmland has already been turned over to their production. Given their lack of commercial availability, I struggle to believe they are yet being produced in any great quantity. My understanding is that they are largely still at the trial stage, except in countries like Brazil where Ethanol-based fuels have long been on the market. In most ofther countries they are at best a small-percentage additive to existing fuels.

It would be incredible if a few trials are having anything like the effect on prices that has been caused by increased demand from India and China, droughts in Ukraine and poor harvests elsewhere. Perhaps the incredible lobbying power of the oil companies is at work again…

The government has backed plans to develop 10 new nuclear power stations. According to Greenpeace these will only cut carbon emissions by 4% by 2025 — too little, too late. Though Greenpeace may not be the most independent source of statistics, I remain hugely sceptical about the wisdom of investing in nuclear fission.

Historically it has been a hugely inefficient source of power, requiring huge financial support from the government to maintain its viability. Though the government claims the costs will not be met by the tax payer, the fact is that we all have to pay for electricity. If nuclear comes to represent 20% of our generating capacity as the government forecasts, that could mean a serious increase in electricity prices. Though the industry claims the new generation of reactors are more efficient, the nuclear industry is already pushing for a government set minimum price for carbon emissions — only when this rises above a certain level does nuclear power become profitable. The higher the price of carbon, the higher the price of power.

They say ‘better the devil you know’, but history shows only failure for nuclear power. The government has invested only miserable sums in alternative energy research — certainly relative to the massive subsidies received by the nuclear industry. Perhaps they might want to consider throwing some big money at alternatives before jumping back in to bed with a very dirty devil.

Time for another Wired-magazine inspired entry. This month’s issue looks at the possibility of a breakthrough in cracking ethanol from cellulose. Current biofuel technologies are inefficient and don’t present a real alternative to oil. But if this breakthrough comes — and billions of dollars of venture capital investment suggests it will — the world is going to be a radically different place…

Imagine if the US no longer relied on oil for fuel, but instead could grow its own ethanol without a dramatic impact on food production. The effect would be far reaching. For a start us Europeans could stop being so uppity about their 83-litre V8 SUVs spitting out tons of carbon dioxide. Without the demand for oil, US interest in the Middle East would likely fall sharply. Would having so many troops stationed in Iraq, Saudi Arabia and Kuwait seem like such a good investment (political, financial, and most of all human)?

With the demand for fuel oil slashed, surely the economics of other oil products would change. The price of plastics and other by-products might rise to make currently disposable products rather more expensive. Clothes, white goods, cars, gadgets, Swedish furniture, CDs and DVDs — many of the trappings of consumerist life might become economically unviable.

Combined with the current trend towards ecological thinking and organic food, there might be a wider trend towards quality. A return to objects designed to last a lifetime. Obviously the price would be higher, but it is a much more sustainable model. It could trigger a switch to materials that are currently considered too expensive for everyday objects — lightweight ceramics and composites for example. Traditional industries like tailors and carpenters might see business boom….

Of course this is all a bit utopian, but there’s no harm in being optimistic when all the world seems to think only in terms of doom and gloom.

So I did my little slot on the Beeb last week, and it went pretty well. My Luddite counterpart was a very nice woman. But I think if we had spent much more time in each other’s company, things might have got a little heated.

Comments like:”I hate car drivers, they are just selfish and pay no attention to cyclists,” and “all that stuff about dishwashers being more eco-friendly than washing up is just propaganda,” were really starting to get under my skin.

Why? Because I consider myself basically a greeny. I may not live in a yurt, survive on a diet of home grown bean-sprouts, and knit my own sandals out of yoghurt, but the majority of people never will. Instead I try to make the best choices I can to minimise the environmental impact of the life that I lead.

For example, I spend a bit extra on longer-lasting, higher-quality, energy-efficient appliances. I buy my electricity from a 100% renewable source. I choose to drive a car that has reasonable performance but is also extremely low on carbon emissions and high on economy (and I am very careful around cyclists). Would I rather walk, cycle, or use public transport? Absolutely. But even if it were possible, it would take me three times as long to get anywhere (I could be working at either end of the country on a given day) and cost many times more. In short, I couldn’t do my job without a car.

So to hear sweeping statements being made about me and the other two thirds of British households with a car is quite frustrating. It is possible to own a car and NOT be a cyclist-murdering, oil-loving, climate change-denier. But as long as either side portrays the choices as black and white, the greenies will never carry the argument.

That is why, despite the scientific consensus, so many people still (want to) believe that it isn’t yet certain that climate change is caused by humans and that there is anything we can do about it. Getting people to live in a yurt and give up modern comforts is simply not an option. But ask them nicely and they are more than likely to meet you half way.